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Contract Practice > General Contract Practice Questions > Flashcards

General Contract Practice Questions Flashcards

1
Q

What is a contract?

A
  • A contract is a legally enforceable agreement between 2 or more parties.
  • It may be oral or written
  • A contract is essentially a set of promises to do something for the other in exchange for a benefit
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2
Q

What 5 things must a contract have to be legally binding?

A
  • Offer and acceptance (one party to make an offer to another)
  • Consideration (parties must exchange some value for the contract to be binding)
  • Capacity (the ability to understand the terms of any obligations under the contract)
  • Intention (clear that the parties intended to enter in to a legally binding contract)
  • Legality
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3
Q

What is the law of tort?

A
  • law which deals with civil wrongs (such as negligence)
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4
Q

What are the elements of the law of tort?

A

1) Negligence (a party was found to be negligent)
2) Duty of care (the negligent party owed a legal duty of care to the victim)
3) Breach of duty (the defendant breached the legal duty of care)
4) Causation (once (3) is established, the causation must be proved)
5) Harm or injury (as a result of (4) there was loss / damage / injury)

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5
Q

What are the 2 remedies in tort law?

A
  • Damages

- Injunction

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6
Q

What are the categories of tort?

A
  • Intentional (e.g. hitting someone)
  • Negligent (e.g. causing an accident by failing to obey traffic rules)
  • Strict liability (e.g. making and selling a defective product)
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7
Q

What do you know about the term “Heads of Claim”?

A
  • The term heads of loss or heads of claim refers to categories of damage that a party may incur.
  • It uses the term “head” in its sense of category, each head is a category
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8
Q

What is a simple contract?

A
  • Contract that is signed under hand by both parties

* Limitation period of 6 years

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9
Q

How can a contract be executed?

A
  • By Hand
  • By Deed
  • Oral
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10
Q

What is Novation?

A
  • Contractual rights and obligations are transferred from one party to another
  • Normally associated with D&B where…
  • Alternative is a “Consultant Switch” - initial appointment ends at the point of the new appointment beginning
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11
Q

What is a Contract Under seal?

A
  • Signed by the parties, witnessed and most importantly made clear that it is executed as a deed
  • Limitation period of 12 year
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12
Q

How many sets of contract documents would you usually produce?

A

Usually 2 (1x set for client signature, 1x set for suppliers)

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13
Q

What is a consultant switch?

A
  • an alternative to novation
  • instead of a partys obligations being transferred from one party to another, its where one agreement ends and another begins
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14
Q

What is a letter of intent?

A
  • A document expressing an intention to enter into a contract at a future date but creating no contractual relationship until that future contract has been entered into.
  • NOT an agreement to enter into a contract
  • Can be used as an interim arrangement to mobilise construction prior to a formal contract being executed
  • Should NEVER be seen as an alternative to a contract
  • Should place a limit on expenditure & client’s liability prior to the contract being put in place
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15
Q

What should generally be included within a letter of intent?

A
  • Acceptance of the contractors offer and definition of the project
  • The agreed contract sum
  • Reference to tender documents and subsequent amendments
  • Instruction to proceed on a certain date
  • Site possession date / PC date
  • Description of the proposed form of contract, any amendments, collateral warranties, performance bonds, PCGs, etc
  • How the contract will be executed
  • Dispute resolution procedures
  • Terms for cancelling the letter
  • Rate of LDs
  • CAP ON EXPENDITURE
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16
Q

Under a letter of intent, how is access to the site given to the contractor?

A

Under a license

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17
Q

What are the types of letter of intent?

A
  • Comfort letter
  • Instruction to proceed with consent to spend
  • Recognition of the existence of a binding contract
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18
Q

What is a ‘comfort letter of intent’?

A

Gives assurance about financial stability to parties (such as a lender) that will in turn give the assurance that the obligation will be met

The receiving party will typically be a lender, who are given the comfort letter before credit is granted by them to fund the project

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19
Q

What is ‘an instruction to proceed with consent to spend letter of intent’?

A

Where the employer reimburses the contractor of reasonable costs

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20
Q

What is a ‘recognition of the existence of a binding contract letter of intent’?

A

Used to execute the contract before signing it (e.g. Director away).

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21
Q

What are the dangers of a letter of intent?

A
  • Not as robust as a formal contract
  • Allows the contractor a position of re-negotiation of the contract sum (for example unknown ground risks)
  • A letter of intent may act as a disincentive to execute a formal contract
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22
Q

What is a purchase order?

A
  • a document issued from seller to buyer indicating their intention to purchase goods / services
  • used to control procurement from suppliers and kept as records of this
  • Once a supplier accepts the purchase order, it is legally binding
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23
Q

What information would you typically find in a purchase order?

A
  • PO number
  • Description of the product/service being purchased
  • Technical details
  • Quantities
  • Any discount if required
  • Agreed prices
  • Payment terms
  • Shipment dates
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24
Q

What goes in to contract documentation?

A
  • Contract
  • Contract amendments
  • Pricing document / contract sum analysis
  • Preliminaries
  • Design and specifications
  • Employers requirements / Contractors proposals
  • Tender addendums
  • Performance bonds / PCG
  • Bonds
  • Collateral warranties
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25
Q

What are the typical sections within a contract?

A
  • Articles of agreement
    • Articles
    • Recitals
    • Contract particulars
    • Attestation
  • Contract conditions
  • Schedules
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26
Q

What are the articles of agreement?

A

Set out the core obligations between the parties

4 sections - what are they?

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27
Q

What are articles?

A

Set out what is agreed between the parties

Articles 1-9 in both SBC and D&B:

  • Defines contractors obligations
  • States contract sum
  • Identifies parties involved
  • Right to adjudication / arbitration
  • Legal proceedings

Articles 10-12 in both SBC and D&B:

  • States the immediate affect of amendments
    • Schedule of amendments
    • Amendment 1 (for 2011 contracts)
    • Contract supersedes all previous agreements
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28
Q

What are recitals?

A

Contextualise the agreement, giving factual explanations for the basis of the contract

Examples of recitals in standard building contract:

  • Recital 1 - Describes work / site
  • Recital 2 - Identifies design info / ERs
  • Recital 3 - Identifies pricing option (A or B?)
  • Recital 4 - CIS, employer a contractor?
  • Recital 5 - Information release schedule
  • Recital 6 - Sections
  • Recital 7 - Framework agreement supplementation?
  • Recital 8 - Supplemental provisions 1-6 & 9
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29
Q

What are the contract particulars?

A

Sets out the aspects of the contract that are particular to the project to which the contract relates

Split in to two parts

  • Part 1 - General
  • Part 2 - Third party rights and collateral warranties

Examples of contract particulars include:

  • Base date
  • Dates for possession / completion of sections
  • Rates of liquidated damages
  • Rectification period
  • Method of payment
  • Advance payment
  • Retention percentage
  • Contractors retention bond
  • Fluctuation options
  • Daywork
  • Insurance / PII
  • Joint fire code
  • Period of suspension
  • Adjudication
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30
Q

What is attestation

A
  • confirming something is genuine

- signature, oath or other forms of certification

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31
Q

What is an information release schedule?

A

If not all the information required to construct the works has been prepared or issued when the tender documentation is issued, or the contract executed, then an information release schedule may be prepared which gives dates for the release of information from the consultant team

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32
Q

What are the conditions of a contract?

A

Set out the legal principle relationships between the parties to a construction contract, determines the allocation of risk

9 Sections:

  • 1 - Interpretations and definitions
  • 2 - Carrying out the works
  • 3 - Control of the works
  • 4 - Payment
  • 5 - Variations (SBC) / Changes (D&B)
  • 6 - Injury, damage and insurance
  • 7 - Assignment, Performance bonds and guarantees, third party rights and collateral warranties
  • 8 - Termination
  • 9 - Settlement of Disputes
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33
Q

What are schedules?

A

Detailed procedural rules for certain situations

  • Schedule 1 – CD submission procedure
  • Schedule 2- Variation and acceleration quotation
  • Schedule 3 – Insurance options
  • Schedule 4 – Code of Practice
  • Schedule 5 – Third party rights
  • Schedule 6 – Form of bond
  • Schedule 7 – Fluctuations options
  • Schedule 8 – Supplemental provisions
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34
Q

Explain schedule 8 supplemental provisions

A

Additional provisions that can be included to the contract

D&B has 10, SBC has 9

The difference is DB does not have a schedule 2 quotation therefore the need for the valuation of changes is included (with associated timescales)

Examples:

  • collaborative working
  • Health and safety
  • Cost savings and value improvement
  • Sustainability / environment considerations
  • Performance indicators and monitoring
  • Notification and negotiation of disputes
  • Transparency
  • The public contracts regulations 2015
  • Named specialists
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35
Q

What is the base date?

A
  • a reference date from which changes in conditions can be assessed
  • JCT recommends 10 days before tender return
  • Sets a reference point from which the conditions of the tender was prepared
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36
Q

What are contra claims?

A

Claims from third parties as a result of the contractors operations

Typically resulting from the contractor’s negligence or contractual breach

Example: flooding a neighbours property

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37
Q

What is a contract sum?

A

The amount originally set out in the contract to be paid to the contractor for completion of the works

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38
Q

What is Retention?

A
  • A percentage of the amount certified to be paid to the contractor which is retained by the client
  • A form of security
  • Retained to ensure that the contractor properly carries out the activities required of them under the contract
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39
Q

How is Retention Held?

A

The employer deducts retention. The contract states the following: ‘…the Employer’s interest in the retention is fiduciary as trustee for the Contractor (but without obligation to invest)’.

The contractor can request that the monies are held in a separate bank account to comply with the above statement (unless the employer is a local authority)

The employer benefits from interest earned on this account

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40
Q

What happens if the Client had spent the money or will not pay the retention?

A
  • If retention is due to the contractor, then the client has a contractual obligation to pay
  • If they do not pay they are in breach of contract
  • Contractor can exercise dispute resolution techniques as listed in the contract
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41
Q

What is the default retention in the JCT form of contract?

A

MP - 0%

SBC and D&B - 3%

IC and MW = 5%

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42
Q

Why may a Contract Sum need to be adjusted when it comes to Final Account?

A
  • Variations
  • Fluctuations
  • Prime Cost sums
  • Provisional sums
  • Payment to nominated sub contractors
  • Statutory fees
  • Loss & Expense
  • LD’s
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43
Q

When is retention released?

A

50% upon completion and 50% released at the end of the defects liability period (final certificate)

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44
Q

What is included with Retention?

A
  • Preliminaries
  • Measured works
  • Variations
  • Materials on site
  • Materials off site
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45
Q

What is excluded with Retention?

A
  • Insurance
  • Statutory fees and charges
  • Costs relating to patent defects
  • Cost of opening up the works and testing the works
  • Loss and expense
  • Fluctuations
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46
Q

What happens if the contractor fails to return during the rectification period?

A

Retention money can be used to fund the payment by others to correct the defects

Relevant notices should be given to the incumbent contractor prior to appointing others to carry out the works

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47
Q

What is the Joint Fire Code?

A
  • Contract Particular 6.14
  • Refers to fire prevention on construction sites

• The Joint Fire Code covers activities through all
stages of design, procurement and construction.

  • Published in 1992 by the Fire Protection Association due to concerns from insurers regarding fire’s on construction sites
  • Applies if value of more than “£2.5 million”
  • Can apply to project with lower value if considerable fire risk
  • Is a “Large Project” if value is over £20 million
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48
Q

Provisions of Joint Fire Code?

A 
Contractor must provide:
• Hand bells, whistles & klaxons
• Security guards
• Fire signage
• Fire doors
• Water supplies
• Portable fire extinguishers
• Where it is a large project, the contractor must provide an appropriate number of fire marshals
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49
Q

What happens if the contractor does not comply with Joint Fire Code?

A
  • Non-compliance can invalidate insurance, contractor should always carry out remedial works to ensure compliance
  • Cost of compliance should be stated in contract
    1) CA issues notice to comply
    2) If the contractor does not carry out remedial work within 7 dyas, the CA can issue an instruction for the employment of someone else to carry out remedial works
    3) CA can deduct cost for remedial works from amount due to contractor via a payless notice
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50
Q

What is the most recent version of the Joint Fire Code and what changes came about?

A

9th edition published in 2015

  • Included fire prevention checklist
  • Updates to on-site fire precautions
  • New emphasis on the need to conduct periodic reviews of fire safety
  • Changes to reflect CDM 2015
  • Guidance on the installation of PV’s
  • Changes to hot work permits
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51
Q

What are fluctuation options?

A
  • Provisions within the contract to deal with the effects of inflation
  • Typically applied to larger projects with a longer programme
  • On smaller projects, the contractor would be expected to factor in inflation within their tender price
  • On larger projects, the contractor may be asked to base their tender price on current market rates, and then the contract will make provisions for the contractor to be reimbursed for price changes to specified time items over the duration of the project
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52
Q

Under JCT 2016 what are the different fluctuation options?

A

Option A – Contribution, Levy and tax fluctuations

Option B – Labour & Material cost and tax fluctuations

Option C – Formula adjustment

Option A is found in Schedule 7 of contract. Options B & C are no longer included within the contract but can be applicable through the contract particulars.

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53
Q

What is the procedure of fluctuations options?

A

1) Check contract for entitlement
2) Contractor to notify CA / EA in writing
3) Contractor must provide relevant info and calculations relating to the adjustment
4) Should be adjusted via an interim certificate

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54
Q

What is Contribution, Levy and tax?

A

Based on the status of the contractor being an “employer” of people

Includes taxes, national insurance and other forms of statutory duties

55
Q

Give example of what fluctuation clauses might allow for?

A
  • changes in taxation (can apply if new taxes are introduced or discounted)
  • fluctuations in the cost of materials, plant and labour
  • fluctuations in head office / administrative costs
56
Q

What is formula adjustment?

A

Instead of using the actual inflation indices, the contract stipulates a formula so that the contract sum can be adjusted

Formula:

C = V(lv-lo)
Lo

C = The amount of the adjustment for the work category to be paid to, or recovered from, the contractor

V = The value of work in the work category for the valuation period

Lv = The index number for the work category for the month during which the midpoint of the valuation period occurred

Lo = The index number for the work category for the base month

57
Q

Where do you get the indices for fluctuations from?

A

Important to ensure that the correct indices are used for the relevant part of the project

Where indices are used that are published by a third party, you must ensure they will publish them for the duration of the project

BCIS has lots of indices you can use

BCIS publishes Price Adjustment Formula Indices under 4 headings:

  • Building
  • Specialist engineering
  • Civil engineering
  • Highways maintenance

Retail Price Index rates are usually quite abit higher than Consumer Price Index (This is because they are calculated differently). RPI is mainly used in the UK, whilst the EU developed the CPI

RPI is higher because it includes allowances for housing costs, mortgages, rents, council tax etc

58
Q

What does fluctuations option B exclude?

A

Non-productive overtime

59
Q

What is excluded in fluctuations?

A
  • L&E
  • Schedule 2 quotation
  • Dayworks
60
Q

What about fluctuations in reimbursement contracts?

A
  • Fluctuations should not generally apply as the contractor is reimbursed on the actual invoice cost of labour, materials and plant.
  • Therefore, the costs should be current
  • Should not be adjusted for any increases in OH&P
61
Q

What is Non-Productive Overtime?

A

Time spent over and above normal working hours but not spent on doing productive activities

E.g. acceleration but weather means some workers must stop their activities

62
Q

What is “Time at Large”?

A

No date for completion / date has become invalid

Contractor is no longer bound by the obligation to complete the works by a certain date

E.g. missed PC and no EOT granted

63
Q

Give examples of why time might be at large?

A
  • Where clauses describing relevant events do not cover all eventualities (if an event occurs thats not covered, time will be ‘at large’)
  • No clear date for completion in the contract
  • Agreement by the parties that the completion date is invalid
  • If the contract does not allow for the construction period to be extended (EOT)
64
Q

What is assignment?

A

Transferring the rights of a contract from one party to another (not the obligations)

65
Q

What are choses in action?

A

Property rights

Choses in action can be transferred to another party via assignment

66
Q

What is meant by Reasonable Skill & Care?

A

A contractual obligation to carry out the works with reasonable skill and care creates a performance obligation for the contractor

An implied duty to exercise the level of skill and care required / expected

67
Q

What is the difference between reasonable skill and care and fitness for purpose?

A

Fitness for purpose is an absolute obligation in regards to how the works are carried out / completed

68
Q

What is meant by Fit for purpose?

A

The contractor must complete the works so that they are fit for purpose

The definition of ‘fit for purpose’ must be defined by the contract documents

69
Q

What is sectional completion?

A

A provision in the contract allowing for different completion dates for different sections of work

Allows the client to take possession of that section

70
Q

What happens when a section reaches PC and is handed back to the client?

A
  • Contractor is no longer responsible for that section
  • Contractor’s insurance ends and client must insure and secure the section
  • Half retention for the section handed back
  • No LDs can be claimed for that section
  • Defects liability period for that section commences
71
Q

What is Partial Possession?

A

Where the client wants to take back possession of part of the site

Not pre-determined in the contract documents

Relies on the contractors agreement to allow the employer to take possession

o Practical completion deemed to have been achieved
o ½ retention released for that part
o Defect liability period begins
o LD’s for section no longer applicable
o Client responsible to insure / secure
72
Q

Why may a contractor not grant partial possession?

A

The contractor is not obliged to accept partial possession however it cannot be unreasonably withheld

Reasons for not granting PP might include:

  • Access routes are hindered
  • Disruption to the works
  • Disruption to the contractor
  • Affects health and safety
  • Incurs additional cost to ensure the above items
73
Q

What alternatives are there to partial possession?

A

1) Client could “use or occupy” the works
- Client does not have sole use of the works
- Contractor remains in possession
- Contractor is responsible for insurance

2) “Early Use”
- Client can use part of works before PC granted
- Client disruptions = L&E / EOTs
- Contractor still liable for LDs
- Insurance - confirm with brokers

74
Q

What is Date for Completion?

A

Clause 1.1 in Contract Particulars

Date by which the contractor is to complete the works / achieve practical completion

‘Time is of the essence’ - describes a situation where the PC date is crucial and failure to achieve this would significantly detract from the projects value (e.g. Olympic stadium)

75
Q

What is the Adjusted Completion Date?

A

Clause 2.26 in Contract Particulars

A new date by which the contractor is to complete the works, determined by an alteration to the PC date

Most commonly adjusted for a date after PC (e.g. EOT)

Can be set earlier:

  • Pre-agreed adjustment
  • Acceleration quotations
  • Supplemental provision 2 (D&B)
  • Variation quotation (omission of scope)
76
Q

What is the difference between Named Sub-Contractor & Nominated Sub-Contractor?

A

Named subcontractor:

  • Not imposed on the contractor
  • Client can include a shortlist in the tender documents which allows the client to influence the selection

Nominated subcontractor:

  • Imposed on the subcontractor
  • Main contractor may object based on certain conditions
  • Depending on the wording of the contract, the contractor may be liable for non-performance of the nominated subcontractor
77
Q

Where would you find contract provisions on subcontractor’s

A

Standard Building Contract – Supplemental Provision 9: Named Specialists

Design and Build Contract – Supplemental Provision 1: Named Sub-Contractors

Intermediate Contract – Schedule 2: Named Sub-Contractors

Minor Works – No mechanism

78
Q

What are Liquidated Damages (LD’s)?

A

A genuine pre-estimate of loss suffered by the Employer as a result of non-completion

Not a penalty, should be based on a calculation of the actual loss the client is likely to incur if the contractor fails to meet the completion date

Contracts generally include a clause for LDs

Usually relates to the contractor not completing the works by the PC date stated in the contract

Often calculated on a daily or weekly basis

79
Q

What are the rules for liquidated damages?

A

Cannot be punitive (a penalty to contractor)

Must be a realistic pre estimate of actual loss to the client

Cost can be per week or pro rata

Contractor can dispute LD’s once in contract if they’re deemed punitive

80
Q

How are liquidated damages calculated?

A

Agreed fixed rate

Generally incurred on a daily or weekly basis

QS not qualified or insured to calculate LD’s but can inform on what they are and things for the client to consider in their calculation

81
Q

What costs might you see included in LD’s?

A
  • Rental costs
  • Temporary accommodation
  • Removal costs
  • Extra running costs
  • Tennant fees
  • Storage costs
  • Finance costs
  • Professional fees
  • Loss of profit (rent / income)
  • Direct expense (rental expense, storage expense)
  • Loss due to extending financial costs (increased interest payments)
82
Q

How are liquidated damages deducted?

A

1) Check amount in contract
2) Certificate of non-completion issued prior to deducting LDs
tbc. …

83
Q

What happens if a contractor is unhappy with the pre-determined amount of LD’s?

A

Should have been reviewed prior to going in to contract

Contractor can appeal if they consider the LDs to be punitive

84
Q

What happens if a contractor is unhappy with the pre-determined amount of LD’s?

A

Should have been reviewed prior to going in to contract

Contractor can appeal if they consider the LDs to be punitive (if the parties agree the rates are punitive, then the employer can agree to be reimbursed for actual losses)

Contractor can appeal to courts and courts can request supporting information from client to substantiate how the LDs was calculated

85
Q

How can liquidated damages be deducted?

A

CA or EA can do this via an interim certificate or payless notice

86
Q

Can Liquidated damages be deducted at any time?

A

No. LD’s can only be deducted once a Certificate of Non-Completion has been issued

87
Q

What level of Liquidated Damages did you have on your projects?

A

TBC….

88
Q

What are Unliquidated Damages?

A

Damages, where the exact amount has not been agreed and are typically determined by the courts

89
Q

Why might a client have to claim Unliquidated Damages

A

Some contracts prevent clients claiming LD’s

Actual losses may be significantly different to those estimated at the time of the contract

90
Q

What are the contractor’s obligations under a JCT contract?

A

Standard Building Contract Clause 2.2 / D&B Clause 2.1

Complete and carry out works in a proper and workmanlike manner

Workmanship in accordance with Contract documents, ER’s, Construction phase plan & statutory requirements

Give all notices required by the statutory requirements and comply

All materials and goods should be of the kind and standard described in the specifications, ER’s

For CDP / D&B – the contractor’s design should be the same as that of any independent architect directly employed by the Client

91
Q

What are the Employer’s obligations under a JCT contract?

A

NONE stated in contract

Payment of contractor on time

Do not disturb the contractor from working with reasonable skill and care

92
Q

What are the advantages and disadvantages of contract amendments?

A

Advantages:

  • Specific risks / hazards can be addressed with project specific amendments
  • Protects the client as more relevant to project

Disadvantages:

  • Contractor likely to increase their tender price as a result of certain amendments (such as taking on more risk)
  • Takes time for the employer and contractor to review
  • Can cause confusion / suspicion
  • No case law to back up
  • Not standardised, creates an adversarial relationship
93
Q

What does Contra Profentum mean?

A

Where a clause is ambiguous, the court will rule against the drafting party

Does not apply to industry standard form contracts (with amendments)

Would apply to a bespoke contract

94
Q

Who should draft contract amendments?

A

Only the client’s legal team

95
Q

What are some typical contract amendments?

A
  • Alteration of risk allowance (less REs / RMs)
  • Final date for payment (14d to 28d)
  • Rectification period (6m to 12m)
  • Additional requirements (Bs, Gs, CWs)
  • Removing rights (right to object a variation)
  • Amendment 1 (for 2011 contracts, CDM 15)
  • Definition of practical completion
  • Removing Contract (Rights of Third Parties) Act 1999
96
Q

What is a bespoke contract?

A

Contract conditions that are drafted specifically for a particular project

97
Q

What are the advantages of a standard form of contract?

A
  • Written by legal experts
  • Rights and obligations clearly set out to the required level of detail
  • Widely understood in the industry
  • No additional time / cost for preparing
  • Relevant case law built up over time
98
Q

What are the disadvantages of standard forms of contract?

A

Apportionment of risk is rarely questioned and therefore becomes implicit – not taken account of

May not be appropriate to the needs of the project or client

99
Q

When would you use a bespoke contract over a stand form?

A
  • For major projects with unique obligations

- Drafting them requires great skill and knowledge, sometimes this can be too daunting for those within the industry

100
Q

What is meant by Statutory requirements?

A

Obligations imposed by law e.g. CDM regulations, working at height regulations, etc

101
Q

Give examples of the different bodies that issue standard forms of contract?

A

JCT

NEC

FIDIC

GC Works

102
Q

What is an Employer’s Agent (EA)?

A

D&B Article 3

An agent acting on behalf of the client as the CA for D&B contracts

Likely to be the lead consultant (usually the architect)

103
Q

What is a Contract Administrator (CA)?

A

Standard Building Contract Article 3

Same role as EA but for traditional forms of contract

104
Q

Typically what does an CA/EA do?

A
  • Issue instructions
  • Co-ordinate the review of information prepared by the contractor
  • Managing change control procedures
  • Review the progress of the works and report to the client
  • Validating or certifying payments
  • Considering claims
  • Monitoring commissioning and inspections
  • Arranging handover
  • Certifying PC
  • Bringing defects to the attention of the contractor
  • Issuing the certificate of making good defects
105
Q

What do you know about Instructions?

A

Clause 3.10 - 3.12

CA / EA issue instructions to contractor

Should be in writing, dated and signed by EA/CA

Should be issued to the client and contractor at the same time

RIBA proposes a pro-forma but its not mandatory

106
Q

Confirmation of Verbal Instruction (CVI)?

A

If an instruction is given verbally by the CA / EA it wont have an immediate effect

1) Contractor must confirm in writing to the CA within 7 days of the CVI
2) If the CA does not reject the notice within 7 days of receipt of the contractor’s notification, then it will become an instruction
3) If the CA confirms in writing within 7 days then it shall take effect from that date

If neither the contractor or CA confirm the CVI, but the contractor complies, the CA can confirm it retrospectively

107
Q

Non-compliance with an Instruction?

A

Contactor must comply unless:

  • its an unreasonable instruction
  • Affects access to site
  • obstructs their obligations to carry out the works works in accordance with the contract
  • Compliance with instruction would affect CDM
  • Has not received acceptance of his Schedule 2 Quotation (Variation)

For non compliance with a reasonable instruction

1) CA/EA issues a “Notice to Comply”
2) If after 7 days of the receipt of the notice from the CA the contractor fails to comply with the instruction, then the Employer may employ others to execute the works and the contractor will be liable to pay for those additional costs to the client OR this can be deducted from Contract Sum

108
Q

What certificates are issued by a CA?

A 
Practical completion certificate 
Section completion certificate 
Non-completion certificate 
Certificate of making good 
Interim certificate 
Final certificate
109
Q

What are the rules for certificates?

A

Standard Building Contract Clause 1.8 – Each Certificate to be issued to Employer and Contractor at the same time

Standard Building Contract Clause 1.10 – No Certificate shall be conclusive evidence that works, materials and design are in accordance with the contract

110
Q

What certificates are issued by an EA?

A 
Practical Completion Statement 
Section Completion Statement 
Non-completion statement 
Notice of completion of making good 
Payment notice 
Final payment notice
111
Q

What Certificates are typically issued on a construction project?

A
  • Practical Completion Certificate
  • Certificate of making good defects / Final Certificate
  • Payless notice
  • Payment Certificate
  • Certificate of non-completion
112
Q

What about if the CA or QS ceases their role mid-way through a project?

A
  • Employer has 21 days to nominate a replacement and inform the contractor
  • Contractor has 7 days of the notice to object
  • No replacement CA is entitled to overrule any instruction expressed by a previous CA
113
Q

What is a Clerk of Works?

A

Appointed by the Employer

Duty to act as the Employers inspector under the CA’s direction

Direction given by Clerk of works shall be of no effect unless it relates to a matter which the contract expressly empowers

A clerk of works oversees the quality and safety of work on a construction site, making sure that building plans and specifications are being followed correctly. Duties include: performing regular inspections of the work on site and comparing completed work with drawings and specifications

114
Q

What is the Date of Possession?

A

Clause 2.4

Date the possession of the site/relevant part of the site shall be given to the contractor to begin construction

115
Q

What is Deferment of possession?

A

Contract Particular 2.4 in Standard Building Contract

A delay in the contractor gaining access to the site

Client must give written notice

JCT entitles the client to defer possession of site upto 6 weeks unless a shorter period was stipulated in the contract particulars

Can be considered a “Relevant Matter” giving rise to claims of an “extension of time” or “loss and expense”

A deferment will have an immediate impact on progress, however it does not extend the contract period, it simply moves it in time with dates of possession and completion which continue to have the same relationship with each other.

If a contractor is given early notice of deferment, they are likely to incur far less costs (e.g. plant hire, possibility of using operatives elsewhere, delivery dates, key dates for sub contractors, possibility of increased costs & interest charges)

116
Q

What about the start date in a minor works contract?

A

NOT called Date of Possession, called “Works Commencement Date”

117
Q

What is a PCSA?

A

Pre Construction Services Agreement enables client to employ a contractor before the main construction commences

Typically part of a “Two stage tender” (The PCSA would be the first stage)

A document that states the services that the contractor is to perform before entering into a contract and identifies the terms and conditions under which the services are to be performed

118
Q

Pro’s and cons of PCSA?

A 
Pros:
• Contractor paid early
• Contractor involvement in design / buildability
• Contractor identification of risks
• Provide a limit of liability

Cons:
• No competition in second stage of tender
• Employer has reduced bargaining power
• Reluctance to remove contractor after undertaking the PCSA
• Additional fees (PCSA fees for the contractor)

119
Q

What is the difference between a PCSA and a Letter of Intent?

A

PCSA:
- to help with buildability, risk management, construction methodology and programming throughout design stages

LOI:
- to mobilise construction

120
Q

What is Acceleration?

A

Standard Building Contract Schedule 2

To increase the planned or current rate of progress in order to complete the works earlier

Acceleration is requested by the client to contractor or visa versa

121
Q

What is an Acceleration Quotation?

A

D&B Part 2 of Schedule 2 (Acceleration Quotation)

A quotation by the contractor for acceleration in carrying out the works

122
Q

What is the process of Acceleration?

A

1) Employer decides they want to achieve PC earlier
2) CA/EA invites proposals from the contractor for an Acceleration Quotation
3) Contractor should respond within 21 days of receiving the invitation from the CA/EA

In response, contractor should:

  • Explain why acceleration quotation was not practical (if the case)
  • If they can provide an acceleration quotation then they should include:
    • Identify the amount of time that can be saved
    • Identify the cost
    • Detail adjustments for loss and expense
    • Detail any other conditions
    • Details of cost for preparation

Acceleration Quotation remains for acceptance by Employer for 7 days from receipt from contractor

123
Q

What is Practical Completion (PC)?

A

Clause 2.30 – 2.31

CA certifies PC when all works described in the contract have been carried out (there is no absolute definition, hence why this is sometimes specified in the contract amendments)

  • Releases ½ retention
  • Ending contractor’s liability for LD’s
  • Signifying the beginning of the “Defects Liability Period”
124
Q

What is a Certificate of Non - Completion?

A

Formal written notice to the contractor that they have failed to complete the works described in the contract by the contract completion date

For sectional completion, separate certificates must be issued per section

Must be issued before the client can claim for LDs

125
Q

What are defects?

A

Works that are not in accordance with the contract

126
Q

What are latent and patent defects?

A

Patent – defects which can be discovered by reasonable inspection e.g. scuff mark on wall, radiator not fully working

Latent – defects which cannot be reasonably discovered and are likely to be discovered a few years after PC e.g. settlement causing cracking in building

127
Q

What is the Rectification Period?

A

Clause 2.38

Previously known as Defects Liability Period

Begins upon certification of practical completion and typically lasts between 6 and 12 months (CP state that 6 months apply if no other length is stated)

Generally, 12 months is recommended as you can test a building in all seasons

During this period, if the client identifies defects that arise to the CA, who then decides whether they are defects

If the CA considers they are defects, they may issue an instruction to the contractor to make them good within a reasonable time

It is the contractor’s responsibility to identify and rectify defects

CA should prepare a “Schedule of defects”, listing the defects that have not yet been rectified, and agrees a date with the contractor that these should be rectified

When the CA is happy that all the defects have been rectified they will issue a “Certificate of making good” which releases the remaining “Retention” and results in the issue of the “Final Certificate”

128
Q

Certificate of Making Good Defects

A

Certificate issued by the CA/EA showing satisfactory conclusion of the defect remedial works

Issued at the end of the rectification period or on completion of defects listed in the schedule of defects

CA/EA should obtain confirmation from design consultants that defects have been made good

If a defects arises after the Certificate of Making Good Defects has been issued, BUT before the Final Certificate is issued, then the contractor should be afforded an opportunity to rectify before the Final Certificate is issued

129
Q

Retention release on Certificate of Making Good Defects?

A

Once the Certificate of Making Good Defects has been issued then The Final Certificate should be issued releasing the remaining retention

Housing Grants Construction and Regeneration Act 1996 disallows ‘pay when paid’ clauses = a contractor cannot withhold the release of sub-contractors retention because they have not had theirs released

130
Q

When is the second half of retention handed back to the contractor?

A

Once the Certificate of Making Good has been issued then The Final Certificate should be issued releasing the remaining retention

131
Q

What is a Final Certificate?

A

Certification issued by the CA that a construction contract has been fully completed.

Releases all remaining money due to the contractor, including remaining “Retention”

Value of final certificate will be based on the final account agreed by the PQS and the contractor

Issued within 2 months (SBC) / 1 month (D&B) of the latter of:

  • End of rectification period
  • Issue of certificate of making good
  • When the contractor receives the Statement of the Final Account

Final certificate can be contested (usually within 28 days)

Under JCT 2016 the final certificate is called the “Final Statement”

132
Q

What certificates are issued by the CA?

A
  • Practical Completion Certificate
  • Certificate of making good defects / Final Certificate
  • Payless notice
  • Payment Certificate
  • Certificate of non-completion
133
Q

Rules of Certificates?

A
  • Issued to client and contractor at the same time

Contract Practice (14 decks)

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